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12 January, 2016 09:07 AM Source: Financial Times - Sri Lanka
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Progressive Sri Lankan firms are disappointed over the alleged suspension or delay in Central Bank approving overseas investments of over $ 500,000 though the monetary regulatory urged caution whilst dismissing criticism.

Private sector sources told the Daily FT that investments in viable projects as well as growth fuelling expansions abroad were being delayed as the Central Bank was dragging its feet over approval. They opined that firms usually submit applications for Exchange Control after a thorough assessment of new investments taking in to account risks or any volatility.

“Timing of some of these investments is critical and undue delay means projects losing their attractiveness. This impacts future earnings from overseas investments and operations. It prevents the country from benefitting via repatriation of profits,” sources pointed out.

Analysts said Central Bank’s action is apparently over the pressure on the rupee as well as lower reserves.

The Rupee depreciated by 9.03% in 2015 overall and 6.6% since September when greater flexibility was brought in to determine the exchange rate.

Yesterday the Rupee closed steady at 143.75/85 to the dollar on Monday. It hit an all-time low of 144.30 on 30 December.

Gross official reserves as at end 2015 were $ 7.3 billion and believed to be under pressure as $5 billion is expected to be repaid on foreign loans in 2016,  according to Central Bank data.

However Governor Arjuna Mahendran yesterday said Central Bank has ‘not prevented’ Sri Lankan companies investing overseas, but was trying to encourage some caution about global uncertainty.

“We haven’t stopped anything. What we have told them is to try and differ investing in overseas owing to the uncertainty worldwide,” Central Bank Governor, Arjuna Mahendran told the Daily FT.

Further clarifying his point Mahendran said the policy of the Government is to encourage free movement of capital.
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